At $13 billion, JPMorgan Chase's tentative settlement with the government certainly is big. And it certainly has sparked a debate about whether it is too severe, given that the bad behavior took place at Bear Stearns and Washington Mutual before they were acquired by JPMorgan with the encouragement of federal bank regulators.

As big as the settlement is, in many respects it is old news and not nearly as consequential as it might seem. The activity in question — misrepresenting bundles of toxic mortgages — occurred before the 2008 financial crisis. And the amount of the settlement, while hardly chump change, represents less than 15% of JPMorgan's annual revenue and about half of this year's profits.

The key question going forward isn't whether the penalty is too high or too low. It's whether the "too big to fail" banks have cleaned up their acts. And here the case of the so-called London Whale, which often gets lumped in with JPMorgan's mortgage woes but is a separate matter, provides a stark illustration of why the biggest banks still pose a threat to the global economy.

The Whale case, which involves a $6 billion loss the bank incurred last year buying and selling financial instruments known as credit default swaps, represents recent misbehavior in a core part of JPMorgan, often considered the best managed of the big banks.

Federal regulators concluded the bank was brazenly attempting to profit by manipulating markets. What's more, the trades amounted to the same kind of casino-like gambling that put the world economy in peril in 2008.

For anyone concerned about a possibility of another financial crisis — or another massive bank bailout — the London Whale trades are chilling. With assets and liabilities exceeding $2 trillion, JPMorgan could not fail without cataclysmic effects on the global economy. And yet there it was, running a massive in-house hedge fund just four years after the crisis and two years after passage of a law that was supposed to prevent such behavior.

In theory, federal regulators will someday finish drafting the regulations for implementing the "Volcker Rule," the provision of the 2010 banking reform law banning proprietary trading desks at too-big-to-fail banks. But given how other parts of the legislation have been watered down or made impossibly complex during the rule-making process, don't count on this one actually stopping the abuse.

While there's no simple solution, safety can be increased by requiring banks to set aside more capital to protect against losses, tying bonuses to long-term performance instead of short-term results — and making sure that executives who break the law go to prison.

The tentative JPMorgan settlement doesn't wash away potential criminal charges. Good. The risks are greater when bankers think they can buy their way out of any trouble.

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